Mortgage servicers modified 30,030 troubled loans through the Home Affordable Modification Program in December, only a slight uptick from the month before and still underwhelming to the program's largest watchdog.
The Treasury Department launched HAMP in March 2009 to provide mortgage servicers an incentive to modify mortgages on the verge of foreclosure. The Obama administration set an early goal of reaching between 3 million and 4 million homeowners with the program, but through December 2010, servicers have started 579,659 permanent modifications and offered roughly 1.7 million three-month trials.
Treasury originally set aside roughly $46 billion in Troubled Asset Relief Program funds for HAMP, but, according to the Congressional Budget Office, it has spent only $12 billion in payouts to servicers and homeowners.
The Special Inspector General for TARP said in a report released Tuesday that after two years, many of HAMP's goals have been largely unmet.
"It is TARP’s failure to realize its most specific Main Street goal, 'preserving homeownership,' that has had perhaps the most devastating consequences," according to SIGTARP. "Treasury’s central foreclosure prevention effort designed to address that goal — the Home Affordable Modification Program— has been beset by problems from the outset and, despite frequent retooling, continues to fall dramatically short of any meaningful standard of success."
When the program first launched, servicers swept borrowers into trial modifications without gathering the proper financial documentation. What resulted was a backlog of trials lasting more than six months. The Treasury then issued new guidance at the start of 2010 requiring that servicers gather the documentation before moving borrowers into a trial. Conversions into permanent status began to ramp up, increasing 45% since June 2010 and the backlog was pared down to below 40,000 as of December.
Meanwhile servicers say documentation continues to be elusive. ResCap CEO Tom Marano, while speaking at the Mortgage Bankers Association summit last week, said getting the borrower to fill out the necessary financial documents for HAMP is the "biggest friction point" to the program's success.
Still, the Congressional Oversight Panel, another overseer of TARP funds, estimated in December that HAMP would eventually provide between 700,000 and 800,000 permanent modifications.
The Treasury defends the program, highlighting not the eventual numbers but HAMP's ability to provide a nationwide standard for how modifications are to be done.
The private-sector alliance of mortgage servicers, known as Hope Now, completed 82,000 modifications through their proprietary programs in November, more than triple the amount of HAMP mods.
While Treasury has said it lacks any ability to discipline mortgage servicers for their performance in a voluntary program, SIGTARP echoed the frustrations of many with HAMP, even opining as to why regulators issued no punishment for the program's "abysmal" numbers.
"Treasury’s reaction to servicer noncompliance with the requirements of HAMP and its related programs appears to be driven largely by the fear that forcing servicers to comply with their contractual obligations will drive them away from HAMP," SIGTARP said. "Despite nearly daily accounts of errors and more serious misconduct, Treasury reports that it has yet to impose a financial penalty on, or claw back incentives from, a single servicer for any reason other than failure to provide data."
Write toJon Prior.
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